Press Releases

Varonis Announces Fourth Quarter and Full Year 2014 Financial Results

Fourth Quarter Total Revenues of $33.7 Million, Up 31% Year-Over-Year

Full Year Total Revenues of $101.3 Million, Up 36% Year-Over-Year

NEW YORK, Feb. 17, 2015 (GLOBE NEWSWIRE) -- Varonis Systems, Inc. (Nasdaq:VRNS), the leading provider of software solutions for unstructured, human-generated enterprise data, today announced results for the fourth quarter and full year ended December 31, 2014.

Yaki Faitelson, Varonis CEO, said, "Our fourth quarter results capped off a strong year for Varonis as we further expanded our product offering, increased our use cases and drove meaningful levels of growth. Companies today must contend with the challenge of keeping critical business information secure without compromising the efficiency of their employees. This is increasing the demand for our solutions because they dramatically reduce risk and simultaneously improve employee productivity. As we enter 2015, we see multiple growth drivers for our business, and we will continue to make investments in support of our products, competitive differentiation and go-to-market initiatives in order to capture the significant market opportunity in front of us."

Financial Highlights for the Fourth Quarter Ended December 31, 2014

Revenues:

Total revenues were $33.7 million, up 31% compared with the fourth quarter of 2013.

License revenues were $21.7 million, up 29% compared with the fourth quarter of 2013.

Maintenance and services revenues were $12.0 million, up 36% compared with the year-ago period.

Operating Income:

GAAP operating income was $0.3 million for the quarter, compared to $1.6 million in the fourth quarter of 2013.

Non-GAAP operating income was $2.1 million for the quarter, compared to $2.2 million in the fourth quarter of 2013.

Net Income (Loss):

GAAP net loss was ($0.3) million, compared to GAAP net income of $1.5 million in the fourth quarter of 2013.

GAAP net loss per diluted share was ($0.01), compared to GAAP net income per diluted share of $0.23 in the fourth quarter of 2013, based on 24.6 million and 6.5 million shares outstanding, respectively.

Non-GAAP net income was $1.5 million, compared to $2.2 million in the fourth quarter of 2013.

Non-GAAP net income per diluted share was $0.06, compared to $0.10 in the fourth quarter of 2013, based on 27.2 million and 21.6 million diluted shares outstanding, respectively.

The GAAP and Non-GAAP net (loss)/income for the quarter included financial expense of ($0.8) million primarily due to foreign exchange losses compared to a gain of $0.1 million in the fourth quarter of 2013 due primarily to foreign exchange gains.

Financial Highlights for the Full Year Ended December 31, 2014

Revenues:

Total revenues were $101.3 million, up 36% compared with 2013.

License revenues were $58.4 million, up 34% compared with 2013.

Maintenance and services revenues were $42.9 million, up 38% compared with 2013.

Operating Loss:

GAAP operating loss was ($17.3) million, compared to ($5.8) million in 2013.

Non-GAAP operating loss was ($12.6) million, compared to ($4.1) million in 2013.

Net Loss:

GAAP net loss was ($19.4) million, compared to a net loss of ($7.5) million in 2013.

GAAP net loss per share was ($0.91), compared to a net loss per share of ($1.93) in 2013, based on 21.2 million and 3.9 million basic shares outstanding, respectively.

Non-GAAP net loss was ($14.7) million, compared to a net loss of ($4.2) million in 2013.

Non-GAAP net loss per share was ($0.60), compared to a net loss per share of ($0.22) in 2013, based on 24.5 million and 19.0 million basic shares outstanding, respectively.

The GAAP and Non-GAAP net loss for 2014 included financial expense of ($1.7) million primarily due to foreign exchange losses. In 2013, GAAP net loss included a loss of ($1.3) million due primarily to the revaluation of warrants to purchase convertible preferred stock, and Non-GAAP net loss included a gain of $0.2 million due primarily to foreign exchange.

The tables at the end of this press release include a reconciliation of GAAP to non-GAAP (loss)/income from operations and net (loss)/income for the three months and year ended December 31, 2014 and 2013. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

Balance Sheet and Cash Flow:

As of December 31, 2014, the Company had $111.7 million in cash and cash equivalents and short-term deposits.

During the year ended December 31, 2014, the Company used ($7.1) million in cash for operations.

Recent Business Highlights

For the fourth quarter of 2014, total revenues in the United States increased 26% over the prior-year period to $17.9 million, total revenues from EMEA increased 37% over the prior-year period to $12.7 million, and total revenues from Rest of World increased 41% over the prior-year period to $3.1 million.

Generated 64% of license and first year maintenance revenues from new customers and 36% from existing customers in the fourth quarter of 2014, compared to 63% and 37%, respectively, in the prior-year period.

Added 363 new customers during the fourth quarter of 2014 compared with 285 in the prior-year period, ending the year with more than 3,300 customers in more than 60 countries.

Identified as a "Representative Vendor" by Gartner, a leading independent provider of IT advisory and market intelligence and research services worldwide, in its first-ever Market Guide for Data-Centric Audit and Protection (DCAP). Gartner's guide includes a sample list of DCAP vendors' capabilities and lists Varonis with "Yes" checkmarks in all five "DCAP Capabilities" for files: Data Discovery, Privilege Management, Activity Monitoring, Audit, and Data Protection.

Financial Outlook

For the first quarter of 2015, Varonis expects revenues in the range of $22.9 million to $23.4 million, representing 31% to 34% year-over-year growth. The Company anticipates first quarter 2015 non-GAAP operating loss in the range of ($10.2) million to ($9.7) million and non-GAAP earnings per basic share in the range of ($0.42) to ($0.40), based on a tax provision of $100 thousand to $300 thousand and 24.7 million basic shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP loss per basic share exclude stock-based compensation expense.

For the full year 2015, Varonis expects revenues in the range of $129.7 million to $132.8 million, representing 28% to 31% year-over-year growth. The Company anticipates full year 2015 non-GAAP operating loss of ($13.0) million to ($12.0) million, and non-GAAP loss per basic share in the range of ($0.56) to ($0.52), based on a tax provision of $650 thousand to $850 thousand and 24.7 million basic shares outstanding. Expectations of non-GAAP loss from operations and non-GAAP loss per basic share exclude stock-based compensation expense.

Conference Call and Webcast

Varonis will host a conference call today, February 17, 2015, at 5:00 p.m., Eastern time, to discuss the Company's fourth quarter and full year 2014 financial results, current financial guidance and other corporate developments. To access this call, dial 888-576-4398 (domestic) or 719-457-1035 (international). The passcode is 6258283. A replay of this conference call will be available through February 24, 2015 at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 6258283. A live webcast of this conference call will be available on the "Investor Relations" page of the Company's website (www.varonis.com), and a replay will be archived on the website as well.

Non-GAAP Financial Measures

Varonis believes that the use of non-GAAP operating loss and non-GAAP net loss is helpful to our investors. These measures, which the Company refers to as our non-GAAP financial measures, are not prepared in accordance with GAAP.

For the three months and year ended December 31, 2014 and 2013, non-GAAP operating loss is calculated as operating loss excluding stock-based compensation expense.

For the three months and year ended December 31, 2014 and 2013, non-GAAP net loss is calculated as net loss excluding (i) stock-based compensation expense and (ii) financial expenses resulting from the revaluation of warrants to purchase convertible preferred stock.

Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company's non-cash expense, the Company believes that providing non-GAAP financial measures that exclude stock-based compensation expense allow for more meaningful comparisons between our operating results from period to period. In addition, the Company believes that excluding financial expenses with respect to revaluation of warrants to purchase convertible preferred stock allows for more meaningful comparison between our net loss from period to period, especially since upon the closing of the IPO, the warrants automatically converted into warrants to purchase our common stock, and as a result, are no longer evaluated at each balance sheet date. Each of our non-GAAP financial measures is an important tool for financial and operational decision making and
for evaluating our own operating results over different periods of time. The non-GAAP financial data are not measures of our financial performance under U.S. GAAP and should not be considered as alternatives to operating loss or net loss or any other performance measures derived in accordance with GAAP. Non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on our reported financial results.
Further, stock-based compensation expense has been, and will continue to be for the foreseeable future, a significant recurring expense in our business and an important part of the compensation provided to our employees. The presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Varonis urges investors to review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measures to evaluate our business.

Forward-Looking Statements

This press release contains, and statements made during the above referenced conference call will contain, "forward-looking" statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including regarding the Company's growth rate and its expectations regarding future revenues, operating income or loss or earnings or loss per share. These statements are not guarantees of future performance, but are based on management's expectations as of the date of this press release and assumptions that are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements.
Important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements include the following: risks associated with anticipated growth in Varonis' addressable market; competitive factors, including increased sales cycle time, changes in the competitive environment, pricing changes and increased competition; the risk that Varonis may not be able to attract or retain employees, including engineers and sales personnel; Varonis' ability to build and expand its direct sales efforts and reseller distribution channels; general economic and industry conditions, including expenditure trends for data governance and data security software; new product introductions and Varonis' ability to develop and deliver innovative products; risks associated with international operations; Varonis' ability to provide high-quality service and
support offerings; and macroeconomic conditions. These and other important risk factors are described more fully in Varonis' reports and other documents filed with the Securities and Exchange Commission and could cause actual results to vary from expectations. All information provided in this press release and in the conference call is as of the date hereof, and Varonis undertakes no duty to update or revise this information, whether as a result of new information, new developments or otherwise, except as required by law.